Note 2 - Merger Transaction

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note 2:   Merger Transaction

As described in Note 1, Legacy Media General and Young were combined in an all-stock merger transaction on November 12, 2013. The merger was accounted for as a reverse acquisition with Young as the acquirer solely for financial accounting purposes. Accordingly, Young’s cost to acquire Legacy Media General has been allocated to the acquired assets, liabilities and commitments based upon their estimated fair values. The pre-merger operations of Legacy Media General consisted of 18 network-affiliated broadcast television stations (and associated websites) primarily located in the southeastern United States. The purchase price of Legacy Media General was calculated based on the number of unrestricted Class A and B common shares outstanding (27,985,795 in aggregate) immediately prior to the merger multiplied by the closing price on November 11, 2013 of $15.06. In addition, the purchase price included the portion of PARS and stock options earned prior to the merger ($12.7 million in aggregate). The initial allocated fair value of acquired assets and assumed liabilities is summarized as follows:

(In thousands)
Current assets acquired	$	89,425
Property and equipment		183,362
Other assets acquired		24,563
FCC broadcast licenses		359,400
Definite lived intangible assets		214,080
Goodwill		487,223
Deferred income tax assets recorded in conjunction with the acquisition		49,725
Current liabilities assumed		(66,372	)
Long-term debt assumed		(701,408	)
Pension and postretirement liabilities assumed		(165,904	)
Other liabilities assumed		(39,908	)
Total	$	434,186

Current assets acquired included cash and cash equivalents of $17.3 million and trade accounts receivable of $64.4 million. 

The amount allocated to definite-lived intangible assets represents the estimated fair values of network affiliations of $154.7 million, advertiser relationships of $58 million and favorable lease assets of $1.4 million. These intangible assets will be amortized over their weighted-average estimated remaining useful lives of 15 years for network affiliations, 7 years for the advertiser relationships and 10 years for favorable lease assets. Acquired property and equipment will be depreciated on a straight-line basis over the respective estimated remaining useful lives.

The initial allocation presented above is based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows, expected future growth rates and estimated discount rates. Network affiliations and advertiser relationships were primarily valued using an excess earnings income approach. The broadcast licenses represent the estimated fair value of the FCC license using a “Greenfield” income approach. Under this approach, the broadcast license is valued by analyzing the estimated after-tax discounted future cash flows of an average market participant. Property and equipment was primarily valued using a cost approach. Acquired program license rights will be amortized to operating expense over the estimated broadcast period in an amount equal to the relative benefit that is expected to be derived from the airing of the program, or on a straight line basis over the life of the program where the expected useful life is one year or less.

Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired and liabilities assembled and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected future synergies. Approximately $164 million of the goodwill recognized is expected to be tax deductible.

The initial purchase price allocation is based upon all information available to the Company at the present time and is subject to change, and such changes could be material.

The results of operations for the year ended December 31, 2013, include the results of Legacy Media General from November 12, 2013, through December 31, 2013. Net operating revenues and operating income of Legacy Media General included in the consolidated statements of comprehensive income, were $48.3 million and $1 million for the year ended December 31, 2013, respectively.

The following table sets forth unaudited pro forma results of operations, assuming that the merger, the consolidation of the VIEs described in Note 3 and the refinancing described in Note 8, occurred as of January 1, 2012:

(In thousands, except per share amounts)	2013		2012
Net operating revenue	$	543,833	$	602,335
Net income		12,254		34,554
Net income attributable to Media General		12,226		32,265
Earnings per share - basic and assuming dilution		0.14		0.36

The pro forma financial information presented above is based on historical results of operations, adjusted for the allocation of the purchase price and other acquisition accounting adjustments, and is not necessarily indicative of what the combined company’s results would have been had the transactions occurred as of January 1, 2012. The pro forma adjustments include adjustments to depreciation and amortization expense due to the increased value assigned to property and equipment and intangible assets, adjustments to stock-based compensation expense due to the revaluation of stock options and PARS and the issuance of deferred stock units to certain executive officers, adjustments to interest expense to reflect the refinancing of the Company’s debt and the related tax effects of the adjustments.

Pro forma results for 2013 presented above, exclude the $13.1 million of merger-related expenses recognized on the consolidated statement of comprehensive income and $16.3 million of merger-related expenses incurred by Legacy Media General prior to the merger. Additionally, results for 2013 also exclude $4.5 million of debt modification and extinguishment costs. These costs were not included in the pro forma amounts above as they are non-recurring in nature.